The Palestinians owe Israeli companies hundreds of millions of dollars for electricity, power and other services. The Israeli official, speaking on condition of anonymity as he wasn't authorized to speak publicly, said Israel would deduct the Palestinian debt against its monthly transfer of tax money is collects for the Palestinians.

That money is some $100 million a month. It wasn't clear how much money would be withheld.

Under interim peace accords, Israel collects taxes on behalf of the Palestinians. Without it, the Palestinian Authority can't pay its workers.